Market Perspective for September 26, 2016

Dovish monetary policy paved the way for a rally last week. The Nasdaq hit a new all-time high and the Russell 2000 increased its 2016 gain to double digits. An extended rally into this week will have to overcome losses on Monday though, after trouble at Deutsche Bank (DB) weighed on global markets.

This will be a heavy week of economic data. August new home sales kicked off the week on a positive note at 609,000 last month, beating expectations by 9,000 homes. The flash services Purchasing Managers Index (PMI) data will be available on Tuesday and is expected to remain steady at 51. August U.S. durable goods orders, due out on Wednesday, are expected to fall 1.4 percent from a year ago.

Thursday’s weekly initial unemployment claims figures are expected to rise slightly while remaining near four-decade lows. August pending home sales data and the final estimate of second quarter U.S. GDP will also be released on Thursday.  Analysts anticipate a rise in September’s consumer confidence as well as the September Chicago PMI, while August personal spending numbers are expected to rise 0.1 percent, with core inflation forecast to climb 0.2 percent.

Oil market volatility is likely to continue this week with an informal meeting of OPEC oil ministers underway in Algiers. Shifts or freezes in production could dramatically impact short-term prices. With Russia and Saudi Arabia pumping at or near record levels, however, the long-term effects of a deal are in doubt.

Deutsche Bank’s financial position came into question after the United States Department of Justice’s targeted Deutsche Bank with a $14 billion fine. The move was interpreted by many as retaliation for the European Union’s $14 billion fine on Apple (AAPL). The German government has not committed to a bailout and Deutsche Bank has stated it has no intention to pay, though nervous investors sent shares to a new multi-decade low, nonetheless.

A few blue chip consumer stocks are scheduled to report this week ahead of the official October earnings season. Nike (NKE) is expected to report increased revenue, but lower earnings per share (EPS) versus the comparable year-ago period. The company is facing stiff competition and a shift in consumer trends following several recent product launches that have fallen flat. PepsiCo (PEP) will release its latest quarterly numbers Thursday before the bell. The company has seen a rise in the sales of juice and snacks, despite declining soft drink consumption. Analysts forecast EPS of $1.32, which is down slightly from the year ago period.

BlackBerry and Costco will also be reporting this week. BlackBerry (BBRY) is expected to report an EPS loss of $0.05 on revenues of approximately $394 million on Wednesday, while Costco (COST) is expected to deliver EPS of $1.73 on revenues of $36.95 billion on Thursday. Investors will focus on the company’s slower revenue growth and the impact from competitors like Wal-Mart (WMT) and online rivals.

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